When Crossett Corporation was organized in January, Year 1, it immediately issued 5,600 shares of $46 par, 6 percent, cumulative preferred stock and 12,000 shares of $14 par common stock. Its earnings history is as follows: Year 1, net loss of $15,900; Year 2, net income of $106,000; Year 3, net income of $85,900. The corporation did not pay a dividend in Year 1.

Required

1. How much is the dividend arrearage as of January 1, Year 2?

Dividend arrearage: $15,456

1. Assume that the board of directors declares a $48,912 cash dividend at the end of Year 2 (remember that the Year 1 and Year 2 preferred dividends are due). How will the dividend be divided between the preferred and common stockholders?

Total amount distributed to preferred shares:

Total amount distributed to common shares: $18,000